Pitfalls for a New Trustee

April 3, 2015

Your parent(s) set up a living trust and named you as the “successor” trustee. That’s the easy part. The hard part comes after the parent/settlor’s death, when you are now faced with administering the trust, preparing an estate tax return, selling and reinvesting assets per the Uniform Prudent Investor Act, paying debts, prosecuting claims, obtaining court approvals and instructions, preparing regular accountings to beneficiaries and, unfortunately way too often, dealing with angry sibling beneficiaries who threaten to remove you if you do not do as they wish.

For example, a trustee is to render an account in the form and manner according to California Pro- bate Code §§ 16060-16064. §16063 requires a statement of receipts and disbursements since the last account (presumably date of death); a statement of assets and liabilities at the end of the period covered by the account; and the trustee’s compensation (if any). If there are potential objections, it is very likely the account will need to be approved by the court, and presented in the form set forth in Probate Code §1060, et seq.

Dealing with death in the family is hard enough without having added responsibilities as a trustee owing a fiduciary duty to the (other) beneficiaries. Run afoul of the law, and you can be liable for trust losses, accrued interest, lost profits/ appreciation, disgorgement of fees, legal costs and possible punitive damages.

As attorneys with financial experience, we can help with this difficult burden and oversee legal compliance to avoid breach of trust claims. If litigation is unavoidable, we have a proven record of representing both trustees and beneficiaries in trust litigation. Often- times, one’s legal fees and costs are paid by the trust.